2021 (5) TMI 211 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in payment of dues - Operational Creditor - existence of debt and dispute or not - existence of debt and dispute or not - time limitation - HELD THAT - Pursuant to the demand made by operational creditor 08.10.2019, the corporate debtor sent emails on 08.08.2019 and 17.08.2019 questioning as to on what basis the claim was made from 21.07.2019 to 16.08.2019 though the work was completed as early as 21.07.2019 and thereby denied liability arising out of the second work order dated 17.07.2019. The operational creditor has not furnished the reason for the claim on the aforesaid period. The operational creditor had manipulated second log book by forging signatures and compelled the authorized person of the corporate debtor to sign in the manipulated log book - On 17.11.2020, the corporate debtor sent a reply legal notice denying the liability to the tune of ₹ 42,02,000/- as claimed by the operational creditor. Inspite of raising disputes over the second tax invoice by email communications, the operational creditor filed an affidavit on 21.01.2020 before this Tribunal stating that the corporate debtor has not raised any dispute with respondent in respect of the debt. Upon perusal of pleadings and documents, it is clear that there is outstanding debt due and payable by Corporate Debtor to Applicant towards hiring charges of cranes. The terms and conditions in work order do not say that only if the cranes are put to use, the hiring charges shall be paid. Once based on work order, the equipment on rental basis is availed by respondent and also acknowledged by respondent, the respondent ought to settle the outstanding dues, irrespective of the fact whether the equipment was under utilisation or not - thus the 'debt' and 'default' is proved by the Applicant. Application admitted - moratorium declared.

Summary

Issues:
Application under Section 9 of the Insolvency and Bankruptcy Code for initiation of Corporate Insolvency Resolution Process due to default in payment of operational debt.

Analysis:
1. The application was filed by the Operational Creditor against the Corporate Debtor for defaulting on payment of an operational debt, seeking initiation of Corporate Insolvency Resolution Process. The debt in question amounted to ?42,02,000/- along with interest at 24% per annum as of 27.09.2019. The Adjudicating Authority had jurisdiction to entertain debts of ?1 lakh and above at the time of filing.

2. The Operational Creditor, engaged in supplying cranes on a hire/rental basis, entered into work orders with the Corporate Debtor for supplying and deploying 3 cranes to their project site. Despite raising invoices for the services provided, the Corporate Debtor only made partial payments towards the outstanding debt, leading to a demand for repayment of the balance amount.

3. The Corporate Debtor, in response, claimed that the Operational Creditor withdrew a crucial crane during the project, affecting their ability to complete the work within the agreed timeframe. They also disputed the number of days the cranes were utilized, alleging discrepancies in the invoicing and log book maintenance by the Operational Creditor.

4. Upon reviewing the submissions and documents, the Tribunal found that there was indeed an outstanding debt owed by the Corporate Debtor to the Operational Creditor for crane hiring charges. The Tribunal noted that the terms of the work order did not specify payment based on crane usage, but rather on availing the equipment, as acknowledged by the Corporate Debtor.

5. Consequently, the Tribunal ruled in favor of the Operational Creditor, establishing the existence of debt and default by the Corporate Debtor. The application for Corporate Insolvency Resolution Process was admitted, and an Interim Resolution Professional was appointed to oversee the proceedings.

6. The Tribunal imposed a moratorium on certain actions against the Corporate Debtor as per the provisions of the Insolvency and Bankruptcy Code. Essential supplies and services to the Corporate Debtor were to continue during this period, and the moratorium would remain in effect until the completion of the Corporate Insolvency Resolution Process.

7. Additionally, the Operational Creditor was directed to pay a specified amount to the Interim Resolution Professional to cover necessary expenses. The Tribunal ordered communication of the decision to all relevant parties and authorities involved in the resolution process for compliance and record-keeping purposes.